What are Endowment Plans

Posted by Admin on 3

Endowment plans are one of the best way to save the money as well as provide financial security to your family.

In typical Endowment plan you need to pay premium till fixed term and at the maturity you will receive Sum Assured along with bonus.

1) If person dies in between the term.
Nominee will receives insured amount along with Bonus accumulated till date.
Policy gets terminated.

2) If person survives till the end of the term.
A maturity amount which typically is Sum Assured + Bonus accumulated till maturity is paid.

Normally the bonus amount is based on the performance of the insurer and hence it is variable, but there are policies which offer guaranteed bonuses.

As Endowment plans provide S.A and Bonus, it is costlier as compared to Term Insurance.
But at the same time it does not provides liquidity like Money Back plans and so are cheaper then Money Back plans.

Endowment plans normally has very high surrender charges and if surrendered during the initial years one may end up loosing even invested money. Because of this endowment plan encourage long term investment which intern helps investor to accumulate huge amount at the end of term.

Depending on the insurance plans insurance companies provides loan facility to investor after completion of fixed years.

If you have long term financial goal, want to provide financial security to your family, want to create wealth by saving regularly with no risk on investment and want moderate return then Endowment policy is for you.

Advantage:

  • Provide risk cover with moderate premium.
  • Risk free return as money is generally invested in debt fund.
  • Forced saving.
  • Tax benefit on premium paid.
  • Maturity amount tax free.
  • Loan facility after few years.

Disadvantage:

  • Long period of investment with poor liquidity.
  • High surrender charges.
  • Only moderate return.

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3 comments:

I do not agree with you on the point that Endowment policies are the best way to generate wealth over long term and to provide Financial Security .

Term Insurance + Mutual funds would be a better combination .

Returns from endownment policies are not more than 6% .

Abhisek said...

I have recently heard a scheme LIC Jeevan Aastha,i want to ask if i invested in it then can i withdraw my money after 1 year?

Abhisek said...

I have recently heard a scheme LIC Jeevan Aastha,i want to ask if i invested in it then can i withdraw my money after 1 year?

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